Here are answers to all the questions that we were asked during the webinar or were emailed to us.
Questions about the share offer
What happens next?
We plan to launch our share offer at 10am on Monday morning at which point we’ll be sharing our investor deck which will include financial forecasts and pre-money valuation. You’ll need to have a Crowdcube account set up to be able to invest.
What are going to do with the money?
Our financial plans are to invest:
How do I get the money out?
- - £150,000 on international trading capability
- - £100,000 on UK digital technology
- - £250,000 on building our team
- - £200,000 on opening stores
Alpkit shares, like all other private limited companies, aren’t traded on public stock exchanges so there isn’t an established market to buy and sell shares. We can buy and sell shares amongst other Alpkit shareholders however this means you may not be able to sell your shares unless you can find another willing buyer.
Is the share offer Covid related – ready for 2nd wave?
We have traded strongly through coronavirus and our cash position is strong. We do not need this money for working capital but it does give us the financial strength that allows us to realise our ambitions.
Are you investing at the same time? Hard limit on shares?
Yes, we are investing £400,000 at the same time on the same shares. We will place a limit on how many shares we want to sell but don’t have a hard cap right now. Much depends on the interest in the shares.
Are you setting up a separate governing forum?
No but we will be creating a number of ways in which shareholders can interact with us.
Covid has demonstrated the resilience of the business so we feel more secure in offering shares to our customers as we have long wanted.
Is there a minimum investment value?
£10 is the minimum
Will you be paying dividends on the shares?
We have no plans to pay a dividend in the near future as profits will be reinvested for growth. Dividends may start after year 3.
What % of equity is for sale?
This will be announced on Monday.
If oversubscribed will investors being scaled back pro-rate (subject to minimum)
If we are in the position where our share issue is oversubscribed we will close the share round rather than pro-rate back everyone’s investment.
If you are investing £400k is this part of the £750k?
Are you only selling to individuals?
How will these shares rank priority wise with initial share holdings
All shares rank equally. They are the same class with the same dividends, voting rights and participation in value.
How and what financial information on Alpkit will you provide to potential share buyers?
We will publish an investor presentation on Monday which includes financial forecasts.
When opening stores, would you be willing to consider reaching out to your shareholders to gauge interest in running/managing the store and/or other roles in the business? Know some people who would jump at the opportunity to open/operate a store either under Alpkit or a franchise.
Yes, please we do want shareholders to be engaged in the running of our company and apply for jobs at Alpkit. I can’t imagine that being a shareholder is part of our recruitment criteria though we do welcome staff to buy also.
Franchise stores are not part of our growth plan because we want to make sure the service.
What’s the pre-money valuation and how has it been arrived at?
The valuation will be released on Monday alongside our investor presentation. The valuation has been set by considering:
What is the cap on the fund raise? What secondary market options are there? How would someone sell shares?
- - The potential financial return for risk that our customer shareholder might expect to make
- - Growth development capital multiples of investors such as private equity
- - The value that our current investors are willing to buy shares at
- - Multiples achieved by comparable investment on similar platforms
The max investment value is £25,000. We don’t have an established secondary market but hope to have a significant shareholder base which means we have our own closed group of buyers and sellers.
What is the maximum investment value?
Can you provide ball park figures today of how much shares are likely to costs and how many shares will be allowed per investor.
This info will be available on Monday and we would prefer to make these public at the same time to all those who have registered an interest.
What will the maximum investment be? I imagine some people could be crowded out by the big wallets.
The minimum investment is £10 and the maximum is £20,000. We are looking to have a broad shareholder base rather than a small group of high net worth investors.
I might have missed this but will shareholders get any discounts when buying products
Yes, there will be a tiered set of shareholder benefits depending on the amount invested.
Similar to other question here (and where I’ve seen failing in companies like Brewdog’s shareholder engagement) will you be leveraging your shareholders skills to build the business. I’m an Audit, Risk and Control specialist with over 10 years’ experience and would be happy to get involved to support controlled growth of the business
We are keen to deepen our relationship with our customers and will develop a shareholder forum which I’m sure will evolve over time. We’re also keen to use the skills and experience within our broad shareholder base. Nick and Colin will lead our shareholder forum.
Questions about our business
You are often out of stock of some products – does this effect sales?
We operate a different buying cycle to other outdoor retailers. They tend to fill their stores full of stock and price high to begin with and use big discounts to clear excess stock before the next season arrives. A retailer’s early customers pay much more than those that wait for the sales.
We buy stock tight and flow stock so we have better prices year-round and don’t have as big an end-of-season discount.
We don’t intend to be sold out. But this does happen and we do miss out on sales but, overall, we believe ours is a better operating model and looking to improve stock availability through better supply chain rather than buying more of everything.
Any plans for a store north of the border
Yes, the right store in the right place, we would love a store in Scotland.
Profitability bike vs clothing
Bike margins are c. 40% with average order value of c. £1300. Clothing margins are c.55% and an average order value of £70. Bike orders are very much an assisted sale as we serve customers at each point of the buying process.
Expanding climbing range
If you are thinking technical climbing products like DMM then we wouldn’t rush to do this. If you’re thinking climbing clothing then yes.
Would you make gear in military colours?
Yes, we would like to increase both our colour and size options as we grow.
Can we really compete in the US against REI and MEC?
REI and MEC are trailblazing retailers and I’m confident that we can find our own path in the US and Canada as our web traffic from the US is very strong. We don’t need to compete against REI and MEC as there is enough different in what we do to. The same applies to Germany and Japan.
You mentioned you make 30% of sales abroad. To what countries do you sell mostly and to roughly what percentage per country.
We have 30% of our international web traffic from outside the UK. 60% is from Europe, 20% of international traffic is from the US, 10% from Australia, Japan and New Zealand and 10% from other countries.
However sales are 10% of the total and we have a ‘close the gap’ initiative as part of our strategy to increase our international conversion rate by looking at payment options, local currency pricing, delivery options and customer service support.
Can you elaborate on similarities between some of your products like Brukit and Kraku and similar innovations by for instance MSR? It makes it hard to unique and commoditises the product and possibly the brand.
A good innovation generally has many parents. There is room in the market so long as it meets our customers’ needs.
There are similarities in many outdoor products, but the devil is the detail, if you took a bunch of £200 waterproofs they would all look quite similar, hoods, arms zips. We concentrate on getting those details right. MSR is a premium American stove manufacture, and the market is big enough for both of us, at different price points.
Have you thought about how to place your product in developing countries. As an example, Ethiopia is a big trekking destination with the Simien and Bale Mountains. It is impossible to buy camping or trekking equipment in Ethiopia and they rely on buying old kit from tourists or people like me taking in stuff (Alpkit of course) every time I visit. Unfortunately, my suitcase is only so big. So, taking equipment cannot be done at scale.
We haven’t thought deeply about every export market but we have an extensive contact in freight forwarding, I’m sure if you talk to customer service team we can try and find a way to help. If I ever get to Ethiopia, I’ll bring some with me, it looks amazing
Do you directly manufacture all the products you sell and if so, do you see a need to outsource of this in the future as arrange and scale increase?
The factory at AK makes about 10% of our sales and is one of our biggest makers. The products we can’t currently make in our factory we source from around the world. Our factory is a critical part of our DNA and we plan to keep it.
Would like to hear your thoughts on the immediate to mid-term outlook for outdoors shops. Given that Go Outdoors has called in administrators, this is a difficult time for retail and outdoors.
We have traded strongly throughout lockdown. Bike sales have been particularly strong. It’s a strength of our business model, product range and customer loyalty that we have traded so well. We see keeping stores and digital sales well balanced as important to our long-term future. We are not going to invest heavily in high street rents and will limit our stores to those where we can offer something different and where our customers go.
Will you be looking to keep your e-commerce fulfilment? Or look to source from a third party.
We want to run our warehouse ourselves. The sales till doesn’t ring until we dispatch our orders and they are bundles of joy to our customers. We want to control that.
Where do you see the major part of your future sales growth? Online or instore at what percentage? What geographical regions at what percentage?
We see our sales mix 60% web and 40% store. Stores are a great recruiter of new web customers. We will still stay mainly a UK business with c. 20% sales international.
Would Alpkit be looking into manufacturing electric bikes and also electric tandem bikes that I don’t think are available easily in the UK to date.
E-bikes are on our product plan. An e-bike tandem isn’t currently on the plan. Though a custom e-bike tandem could be a possibility.
Not sure if this has been covered already… what is the exposure to Brexit risk and how are you managing this risk (entangled with Covid and recession)
Our biggest risk from Brexit is our currency risk. Most of our raw materials and products are bought in US dollars so currency swings have a big effect on our costs. When sterling is weak our prices go up and when sterling is strong our prices come down.
So far, we have been able to keep our prices sharp in the market despite volatility in sterling.
Covid and recession will affect our sales. We have a small market share so often we can do well in a down turn as we take sales from other less agile retailers and brands.
What is your prediction on growth of you market segment (as opposed to growing your share at the expense of other brands by cannibalisation?)
The market data we have anticipates modest growth in outdoor and bike over the long term. We see our market share growing to c.2% so we are not that exposed to market macro-economics.
Often smaller sizes seem to be sold out. Do you need to balance the sizes to meet what seems to be a larger market for small sizes?
As our scale grows we expect to be able to buy more of both smaller and larger sizes to better serve all our customers.
How much of a threat is Decathlon? Hard to compete against … huge product range, keenly priced …. Quality generally not seen as terrible (at least by the public)
Decathlon are a superb business with excellent production capability and huge buying power. We see Alpkit as a ‘first considered purchase’ so come into our own when someone has bought from Decathlon and now looking for a more technical product.
Questions concerning our strategy and finances
What is the current debt leverage – what’s the appetite for debt leverage
Gearing ratio is currently c130% as we took on £1m mezzanine debt in 2018. This is long term funding and we currently repay this debt at £100k per annum. Our long-term gearing appetite is more like 60% and after this share issue we will be less than this.
I’d be interested to know the w/cap cash cycle and cash generation and what is needed to accommodate growth and also what growth 2020-2023 looks like
We follow a typical order cycle for product sourced from the Far East with 90-day lead time, 30-day shipping and we aim to turn stock 3 times a year. We pay an initial deposit on order and the balance 30 days after shipping.
The strategy to get to c.£25m gross orders is based on what mix of UK v international sales? Given 30% of web traffic is international leading to 10% of sales. How much of the funds will be directed to supporting international growth strategy?
We have planned c. £150,000 over the 3 years to spend on web technology to support international development of the digital business.
What does infrastructure look like? Do you have capabilities to go to £70m, warehousing, IT etc?
I Have run a £70m business I do know the capabilities we need. Whilst we don’t yet have the systems or the warehousing capacity today for a £70m brand the investment needed is part of our thinking and modelled appropriately in our financial plan.
Is the plan £25m or £70m? Both figures were mentioned.
Our plan is to grow to £25m over the next few years. We see an opportunity for a £70m direct-to-consumer multi-activity outdoor and bike brand to exist in the UK. Knowing that this opportunity exists I’d like Alpkit to be in a position to be that brand but only if it means we stay true to our ethos.
Are you looking to adjust your strategy in the next 5 years? In what aspects (pricing, target customers, distribution strategy ….)?
We do not see any major change in direction and our strategy is consistent with our approach over the last few years. However, part of being agile is always looking at our strategy and adjusting it to take account of the position in which we find ourselves
Questions concerning our Sustainability Principles
I’d like to hear any plans you have for diversity of your shareholders
Our shares are all owned by our 5 strong founder group. We hope to broaden the diversity of our shareholding through this share issue.
Great to hear about sustainability and B Corp stats. Would love to know what, if any plans you have about designing products for longer use/repair and re-use. I know you do some of this already.
We have made a commitment with B Corp to become world class, designed for disassembly or true circular products are avenues we will explore. This is already part of the design teams thinking. We also have a strong process to identify what faults we have and how to improve, there is regular contact between the product and returns team.
Alpkit provides high quality products with a sustainable ethos. With expansion and an increase in product demand, how do you plan to keep this product quality? Will you continue to manufacture at AK HQ? Or will you outsource? Can you give some details?
We design quality into our products by making sure we are very careful about our fabric selection and the factories we choose to make our product. Good fabrics, good design and a good factory are the building blocks of good quality. We have well established QC procedures.
We do occasionally have products that don’t meet our quality standards. Some brands dispose of these to landfill. We never do that and tend to sell them as perfect seconds or factory seconds depending on the quality issue which we are fully transparent about.
Questions concerning our team
I realise that Dave left Go Outdoors when sold to JD but what will be your strategy to avoid growing too rapidly and ending up where Go is today with insolvency issues.
I left GO in 2012 which was after we completed the partial sale to 3i as I wanted to do my own thing. I have lifelong friends at GO and also at JD and it is such a shame that GO has hit troubles. I think the troubles stem from its reliance on a big retail estate with high rents. This is not our business model.
Some of the leadership seem to have left previous outdoor companies they have helped build. How long is leadership planning to stay on board at Alpkit?
None of us have any plans on leaving soon. Alpkit is a lifetime’s work and although I cut my teeth at GO and Colin has experience at Rohan amongst other businesses I do see this is my forever job though I will eventually retire.